Gold extends record run as Fed policy sinks dollar

Silver holds 30-year high; copper hits fresh 26-month peak

SAN FRANCISCO (MarketWatch) — Gold futures rose Wednesday to their eleventh record close of the month, as the dollar dropped on expectations the Federal Reserve will keep money flowing to revive the economy.

Gold for December delivery
GCZ10
the most active contract, rose $2, or 0.2%, to $1,310.30 an ounce on the Comex division of the New York Mercantile Exchange. It hit a record at $1,314.80 an ounce intraday.

Silver futures held firm at the metal’s best level in 30 years and copper also kept gains to settle at its highest since late July, 2008.

Gold’s settlement Wednesday was the eleventh record high settlement for gold this month -- six of those consecutive. So far in September, gold has advanced 4.8%, and added nearly 20% for the year.

Its most recent spurt has been supported by expectations that the Federal Reserve would enter into a new round of monetary stimulus by buying bonds in the private sector -- about $1 trillion by some estimates -- in a process known as quantitative easing. While this policy should stimulate the economy, it may do so at the expense of the dollar’s value, making a currency alternative like gold attractive.

“The dollar is lower again today and there’s a lot of money out there chasing the safe-havens of gold and silver,” said Michael K. Smith, president of T & K Futures in Florida.

Gold’s run isn’t exhausted, Smith said. Central banks “around the world are printing money to keep (financial markets) afloat,” reflecting poorly on the prospects for the dollar. Interest rates are expected to remain low, pushing investors toward gold and other metals, he added.

Smith expects silver to end the year around $23 an ounce and gold around $1,360 an ounce.

The dollar index
DXY, -0.10%
which tracks the U.S. unit against a basket of six currencies, declined 0.4% to 78.71 on the expectations that the Federal Reserve would resort to further easing. The index has lost more than 5% this month and is down 8.5% for the quarter. See article on dollar’s pullback against most major global currencies.

Gold closed at a record $1,308.30 an ounce Tuesday, finishing above the key psychological mark of $1,300 for the first time. The metal has rallied to record high settlements for nine of the ten past sessions.

On Wednesday, silver for December delivery
SIZ10
added 24 cents, or 1.1%, to $21.95 an ounce.

News earlier this week that the U.S. raised duties on copper pipes and tubes from China have had little impact of copper futures. The decision is viewed as retaliation against China’s decision to increase duties on U.S. chicken products. Read commentary more about copper and China.

Platinum and palladium also posted gains Wednesday. Platinum for January delivery
PLF11
advanced $15.90, or 1%, to $1,656.60 an ounce. That’s the highest settlement for platinum since mid May.

Palladium for December delivery
PAZ10
rose $6.85, or 1.2%, to $567.30 an ounce. That’s palladium best close since April 21.

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